Essay on Homework Assignment Ch1-2

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AC 550 Intermediate Accounting
Homework assignment Ch1-2

Chapter 1


1. GAAP is the term used to indicate the whole body of FASB authoritative literature.

Ans: True

2. Any company claiming compliance with GAAP must comply with most standards and interpretations but does not have to follow the disclosure requirements.

Ans: False – All company that is claiming compliance with GAAP must follow all standards and interpretations especially disclosure requirements.

3. The primary governmental body that has influence over the FASB is the SEC.

Ans: True

4. The FASB has a government mandate and therefore does not have to follow due process in
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6. General-purpose financial statements are prepared primarily for:

(a) Internal users.

(b) External users.

(c) Auditors.

(d) Government regulators.

7. Economic consequences of accounting standard-setting means:

(a) Standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.

(b) Standard-setters must ensure that no new costs are incurred when a new standard is issued.

(c) The objective of financial reporting should be politically motivated to ensure acceptance by the general public.

(d) Accounting standards can have detrimental impacts on the wealth levels of the providers of financial information.

8. The expectations gap is:

(a) What financial information management provides and what users want.

(b) What the public thinks accountants should do and what accountants think they can do.

(c) What the governmental agencies want from standard-setting and what the standard-setters provide.

(d) What the users of financial statements want from the government and what is provided.

Chapter 2

E2-5 (Elements of Financial Statements)

(a) Arises from peripheral or incidental transactions.

Ans: Gains


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